IS the CFBP Constitutional?

The US Court of Appeals for the DC Circuit heard oral arguments yesterday questioning the Constitutionality of the Consumer Financial Protection Bureau.

This might get interesting, as there remain serious separation of powers issues. Congress has no oversight of the CFPB budget, as it gets its funding directly from the Fed. And the Fed itself is not really a government organization. The Federal Reserve banks are in fact privately owned by various banks.

There is a possibility that this could get interesting for the CFPB. I for one am going to be watching this closely.

In answer to some questions about why the Federal Reserve is not really a governmental agency, just take a look at Wikipedia's description, part of which is pasted here:

The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors or Federal Reserve Board (FRB), partially presidentially appointed Federal Open Market Committee (FOMC), twelve regional Federal Reserve Banks located in major cities throughout the nation, numerous privately owned U.S. member banks, and various advisory councils.

The federal government sets the salaries of the Board's seven governors. Nationally chartered commercial banks are required to hold stock in the Federal Reserve Bank of their region, which entitles them to elect some of their board members. The FOMC sets monetary policy and consists of all seven members of the Board of Governors and the twelve regional bank presidents, though only five bank presidents vote at any given time: the president of the New York Fed and four others who rotate through one-year terms. Thus, the Federal Reserve System has both private and public components to serve the interests of the public and private banks.

The structure is considered unique among central banks. It is also unusual in that the United States Department of the Treasury, an entity outside of the central bank, creates the currency used. The Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms."

Pretty complex structure. But definitely not open to normal Congressional supervision.

But if the Fed is Constitutional, shouldn't the CFPB also be? Maybe - maybe not. We'll let the courts decide. And while there may be politics involved, it will still be interesting to see what happens.

I found this article from a lawyer tracking the case. He said that the questions asked about the judges definitely showed concern about how the CFPB is organized, and the power and independence it has. However, it does not expect them to find the whole agency un-Constitutonal.

Instead, they will probably look for a narrower "fix", if they feel one is needed. The author thinks that the court may just eliminate the statutes provision that the director of the CFPB can be removed for cause.